Darling Petrol Corp. granted stock options to executives in early 20X1. The stock options vest over five years and expire after eight years. In total, the options allow the purchase of 400,000 shares at $2 per share. Option pricing models indicate that the options have a total fair value of $1,400,000. Estimates of retention are 82% at the end of 20X1 and 80% at the end of 20X2.

Required:
1. Provide the journal entries to be recorded with respect to the options at the end of 20X1 and 20X2.
2. What would the balance be in the equity account for stock options at the end of the fifth year if retention was at 80%?
3. Assume that actual retention was 80%, and the options were exercised at the end of the sixth year when the market price of common shares is $29. Provide the entry for exercise.
4. Alternatively, assume that retention was 80% but the options were allowed to lapse after eight years when the price of common shares is $1.25. Provide the entry for the lapse.